Analysis – Disastrous intervention puts Thai rice exporters in peril

08/08/2012
By Apornrath Phoonphongphiphat

BANGKOK (Reuters) – Millions of tonnes of rice that no one wants; huge losses for the state budget; farmers more interested in quantity than quality; exporters throwing in the towel. Thailand’s world-beating rice industry is in a sorry state.

The government won election a year ago by promising to pay farmers double the market level at the time for their rice — a policy to help the poor, ostensibly, but one that has backfired by making grain so expensive that hardly anyone is buying it.

As a result Thailand exported just 3.45 million tonnes in the first half, down 45 percent from the same 2011 period.

The Thai Rice Exporters’ Association is expecting exports of no more than 6.5 million tonnes for the full year against 8 million to 10 million normally, and that means Thailand will probably lose its crown as the world’s top rice shipper to India or Vietnam.

Analysts Skeptical of Proposed Rice Cartel

Monday, May 5th, 2008
By Jason Simpkins
Associate Editor
Money Morning (USA)

Five Asian rice producers, led by Thailand, are considering the establishment of a cartel –similar to the Organization of Petroleum Exporting Countries – to better control the supply and price of rice.

However, many analysts are skeptical that such an initiative will ever gain traction.

"Though we are the food center of the world, we have had little influence on the price," Thailand government spokesman Vichienchot Sukchokrat said last week. "With the oil price rising so much, we import expensive oil but sell rice very cheaply, and that’s unfair to us and hurts our trade balance."

Thailand is the world’s leading rice supplier, having exported an estimated 9.5 million metric tons of rice in 2007. With countries like Vietnam, India and Indonesia curbing exports to shore up domestic supplies, Thailand could be responsible for even more of the world’s rice intake.

Rice export volume from Thailand rose 36% in the first four months of the year, the Bangkok Post reported. According to the country’s Foreign Trade Department, Thailand may supply 45% of the world’s rice exports this year.

With rice prices soaring, Thailand has taken the lead in rallying support for a cartel that would include: Laos, Myanmar, Cambodia, and Vietnam. Combined, these five nations account for 14% of world output.

Laos Foreign Ministry spokesman Yong Chanthalansy said Friday that his country would "seriously consider" the idea. Thai officials have also confirmed that discussions were held with Myanmar last Wednesday and Cambodia has voiced support for such action in the past.

"By forming an association, we can help prevent a price war and exchange information about food security," Khieu Kanharith, Cambodia’s chief government spokesman, told the Associated Press.

However, many experts are skeptical such an organization will ever form because of the tremendous amount of coordination and effort that would have to be involved. While the nations involved would be able to discuss a pricing scale and share information and technology, rice supplies cannot be as easily manipulated as oil production.

"It’s impossible. We can’t fix prices as OPEC does because we can’t control our production like OPEC," Chookiat Ophaswongse, President of the Thai Rice Exporters Association, told Reuters. "It might be easy for Communist Laos or Vietnam to control their farmers, but we can’t do that in a free-market economy like Thailand. Farmers will rush to grow more rice when prices go up and shift to other crops when prices fall."

The would-be group includes two democracies, two Communist states and a military dictatorship.

The idea of a cartel was previously discussed in 2001, when Thai exports were struggling to compete with markedly less expensive rice from India, Pakistan and Vietnam. The proposal fizzled then as it seems destined to now.

Nonetheless, agricultural ministers will further probe the possibility in September at a meeting of the 10-nation ASEAN regional group.